Macroeconomic

Economic growth

an increase in the output of an economy and in the long run an increase in the economy’s productive potential

Actual economic growth

an increase in the output of an economy

potential economic growth

an increase in an economy’s productive capacity

aggregate demand (AD)

the total demand for a country’s product at a given price level. It consists of consumer expenditure, investment, government spending and net exports (exports - imports)

aggregate supply (AS)

the total amount of goods and services that domestic (local) firms are willing to supply at a given price level

full employment / low unemployment

the lowest level of unemployment possible

economically inactive

people of working age who are not in the labour force

economically active

being a member of the labour force

stable prices

the price level in the economy not changing significantly over time

inflation rate

the percentage rise in the price level of goods and services over time

inflation

a rise in the average price of goods and servies over time

balence of payments

the record of a country’s economic transactions with other countries

government budget

the relationship between government revenue and government spending

government budget deficit

government spending is higher than government revenue

government budget surplus

government revenue is higher than government spending

multiplier effect

the final impact on total (aggregate) demand being greater than the initial change

national debt

the total amount the government has borrowed over time

progressive tax

tax that takes larger percentage of the income or wealth of the rich

proportional tax

tax that takes the same percentage of the income or wealth of all taxpayers

regressive tax

tax that takes a larger percentage of the income or wealth of those living in poverty

fiscal policy

decisions on government spending and taxation designed to influence aggregate demand

flat taxes

taxes with a single rate

expansionary fiscal policy

rises in government expendityre and/or cuts in taxation designed to increase aggregate demand

contractionary fiscal policy

cuts in government expenditure and/or rises in taxation designed to reduce aggregate demand

foreign exchange rate

the price of one currency in terms of another currrency or currencies

monetary policy

decisions on the money supply, the rate of interest and the foreign exchange rate taken to influence aggregate demand

expansionary monetary policy

increases in the money supply and/or the rate of interest designed to increase aggregate demand

contractionary monetary policy

cuts in the money supply or growth of the money supply and/or rises in the rate of interest designed to reduce aggregate demand

supply-side policy

measures designed to increase aggregate supply

deregulation

the removal of rules and regulations

gross domestic product (GDP)

the total output of a country

circular flow of income

the movement of expenditure, income and output around the economy

value added

the difference between the sales revenue received and the cost of raw materials used

transfer payment

transfers of income from one group to another not in return for providing a good or service

nominal GDP

GDP at current market prices and so not adjusted for inflation

real GDP

GDP at constant prices and so adjusted for inflation

GDP per capita

GDP per head and is found by dividing real GDP by population

informal economy

that part of the economy that is not regulated, protected or taxed by the government

subsistence agriculture

the output of agricultural goods for farmers’ personal use

International Monetary Fund (IMF)

an internation organisation which promotes international cooperation and helps countries with balance of payments problems

sustainable economic growth

economic growth that does not endanger the country’s ability to grow in the future

recession

a reduction in real GDP over a period of six months or more

employment

being involved in a productive activity for which payment is received

unemployment

being without a job while wiling and able to work

flexible labour force

a labour force which adjusts quickly and smoothly to changes in market conditions

Labour Force Survey

a measure of employment and unemployment in the country’s population by means of a survey

unemployment rate

the percentae of the labour force who are willing and able to work but are without jobs

frictional unemployment

temporary unemployment arising from workers being in between jobs

search unemployment

unemployment arising from workers who have lost their jobs looking for a job they are willing to accept

casual unemployment

unemplyment arising from workers regularly being between periods of employment

structural unemployment

unemploymenr caused by long-term changes in the pattern of demand and methods of production

regional unemployment

unemploymenr caused by a decline in job opportunities in a particular area of the country

technological unemployment

unemployment caused by workers being replaced by capital equipment

cyclical unemployment

unemployment caused by a lack of aggregate demand

seasonal unemployment

unemployment caused by a fall in demand at particular times of the year

inflation

a rise in the average price of goods and services over time

deflation

a fall in the average price of goods and services over time